Second-order consequences of post-corona new normal

May 6, 2020

Read the previous part of this article.

Second-order effects are category-defining, paradigm-shifting and changing the course of many product categories, habits and values for good.

They are big changes that may seem to approach slowly but yet their coming is a certainty, it’s just a matter of time: objects in your horizon may appear further than they are.

Digitalisation is not a new thing. It has been going on since we got our first computers. The pacing of the change and mass adaption varies on circumstances, happy incidents and pure luck. However, it is now possible to reach wide reach and adoption in a matter of months instead of years or decades that was the norm in the age of TV, radio, fax, VCR and other older technologies.

A big shift is happening in the traditional workplace. Open office spaces have been the trend in recent decades as well as office hotels, shared co-working spaces and remote offices.

In this decade, it may become the norm that a regular office as we know it is not needed anymore. It will be replaced with some other means to gather people together for temporarily or on a semi-permanent basis and in a geographically decentralised manner.

This work location shift has many implications. Real estate is the most obvious one. Do we still need the high-rises in densely populated areas with skyrocket high prices as offices? Maybe they will be repurposed as residential buildings or find some other purposes.

This single change triggers many other far-reaching consequences related to the office working function. If there’s no need for daily commute to the centre there will be less traffic congestions, peak and daily public transportation volume, lower demand for parking and private vehicles.

Similarly, all the services catered towards the 9-5 working community may need to adapt to different demand patterns, or close shop completely. Less high-end business restaurants, events and other services that were mainly relying on a concentrated workforce and office clientele needs. The threshold to attend a physical event becomes larger if it is not in a relatively close approximate from your office.

This has been the trend already for some time. The gravitational pull of your office desk was already very intense and free food and drinks were not enough to make you leave your post during the working hours.

The implications trickle down further in the value chain to various industries and sectors. What happens to office furniture and device manufacturers, the service sector designing, building, maintaining and entertaining the concept of a centralised office function? Less need for cleaning, security, coffee machines, water coolers, large printers, meeting rooms and office decor.

Some of the categories will slowly perish or diminish in significance. Others just transform into the new demand needs. People still need to do the work. They still need desks, chairs, computers, coffee machines, lunches and all the other work-related necessities. Where and how they consume them will shift.

Home studios and work desks with extensive video and audio equipment with a silent working environment become ever more important. Maybe the whole family can move out of town and get a more spacious house with a private room for each working family member. If you don’t commute (that much) anymore do you really need the (second) car?

With less business travel and more remote meetings who needs formal business clothing? Maybe a nice top will do. You just need to be more careful not to show your underpants in the video stream. By the day we’re getting better with the video meeting format and soon it’s a no issue at all. AR and VR make our business avatars look like whoever we prefer to be. Virtual clothes will do. Ready Player One is approaching soon.

If your work is carried out from wherever and the remote communication is the norm why would you travel for business? The whole business travel service sector has some re-considerations to do. Leisure travel may even become a larger sector since now you just want to get away from your “workplace” for a while.

Airlines experienced the shift from business travel to low-cost travel where the lucrative business travellers got used to economy-level service targeted for consumers. The same may happen to business travel lodging in the extent that people are still doing it.

A shift in the nature of work has implications to the residential real estate as well. Most likely people still prefer idyllic city centres but the lure of spacious housing surrounded or close to nature has its appeal, too. Many of the high demand real estate locations may not look that appealing in some years. After all, mortgage payments tend to go for decades and now something in 10-30 years looks really far away. Maybe it’s time to re-check the premises and assumptions underneath the current property values and prices. The price is only as high as there’re demand and expectations for future utility.

Another unrelated but connected trend is the service-as-everything that is gaining a foothold among the younger generations. It’s more convenient to purchase everything on a monthly basis instead of committing for years if not decades ahead. This applies to housing as much as it has already become the norm with cars that are the second- largest purchase decision a regular household does.

Urban development, zoning and local communities

Work from home or anywhere concept puts different requirements for the community as well. Convenience is as important as ever. If we can get ice–cream in a few minutes from Amazon delivered to our door why should not everything else work the same way? With less commute and private vehicles needed for work what happens to the shopping malls, parking areas and to the idea that you need your own logistics to collect your items from a centralised collection points (i.e. retail shops). The consumer-centric approach in logistics and ecommerce puts the pressure on the last mile distribution and deliveries. Currently, no logistics company can keep their previous service levels due to exponentially higher demand, in practice, overnight.

Now, it’s not just the residential demand but all the demand. Business is carried out locally and decentralised. Instead of one or few offices, a company may have hundreds or thousands of offices depending on the number of employees it has. Every employee has their own office, at home.

Ecologically a diaspora from the city centres can have undesired consequences. More resources are needed to accommodate people in less dense accommodation units that are more dispersive and further apart yet requiring public services and infrastructure. From the creative, innovation and productivity perspective the results are better the closer people are together. It remains to be seen whether this effect can continue in remote and distant cooperation models. After all, we are social animals craving for validation and intimacy with other people.

The next part of this article talks about the roadblocks of the post-corona new normal. Read the previous part.

The others parts are:
Post-corona new normal
Coping with post-coronavirus realities
The new post-corona world.